Disadvantages of a reverse mortgage: If you listen to Missouri Senator Claire McCaskill you’d think that the federally funded HECM program is riddled with fraud and victimizing older Americans and costing the government billions. Those are not my words but the words of Newsday journalist Saul Friedman, who informing his readers that Reverse Mortgages Are Still Safe.
Friedman writes urges seniors…
Not to worry. Your reverse mortgage is safe, and so is the 20-year-old program that has insured such loans for more than 500,000 older homeowners, including 112,000 last year.
He points out that…
While the industry acknowledges there are some problems with some agents’ sales pitches and insufficient counseling of borrowers, government auditors have found scant evidence of fraud in the market for the most popular reverse mortgage, the Home Equity Conversion Mortgage (HECM). It is tightly regulated by the Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD).
At the June 29 hearing of the Senate Special Committee on Aging, of which McCaskill is a member, she said, “The patchwork of regulation that is supposed to protect seniors and taxpayers has left both uncovered, resulting in a recent request by HUD for an additional $800 million of federal funds to cover losses that I had warned about.”
Friedman properly makes the case that $800 million is less than eight-tenths of 1 percent of the total of FHA insured loans, $105 billion, according the HUD inspector general.
He also points out that…
For the first time, HUD has requested the $800 million for 2010, to cover possible losses based on assumptions that the value of some insured homes may have declined and are worth less than the mortgage. If the loan expires when the home is vacated, FHA would be liable for the difference and would protect the lender against loss. The homeowner-borrower that McCaskill worries about would not be liable.
I seems that the Missouri Senator only focuses on what she views as the disadvantages of reverse mortgages but when asked Sen. McCaskill office could not present any specific cases of fraud.
